Starbucks 2005 Annual Report Download - page 46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal years ended October 2, 2005, October 3, 2004, and September 28, 2003
Note 1: Summary of Significant Accounting Policies
Description of Business
Starbucks Corporation (together with its subsidiaries, ""Starbucks'' or the ""Company'') purchases and roasts
high-quality whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso
beverages, cold blended beverages, a variety of complementary food items, coffee-related accessories and
equipment, a selection of premium teas and a line of compact discs, primarily through its Company-operated
retail stores. Starbucks sells coffee and tea products and licenses its trademark through other channels and,
through certain of its equity investees, Starbucks also produces and sells bottled Frappuccino» coffee drinks
and Starbucks DoubleShot» espresso drink and a line of superpremium ice creams. All channels outside the
Company-operated retail stores are collectively known as ""Specialty Operations.'' The Company's objective is
to establish Starbucks as the most recognized and respected brand in the world. To achieve this goal, the
Company plans to continue rapid expansion of its retail operations, to grow its Specialty Operations and to
selectively pursue other opportunities to leverage the Starbucks brand through the introduction of new
products and the development of new channels of distribution.
Principles of Consolidation
The consolidated financial statements reflect the financial position and operating results of Starbucks, which
include wholly owned subsidiaries and investees controlled by the Company.
Investments in entities that the Company does not control, but has the ability to exercise significant influence
over operating and financial policies, are accounted for under the equity method. Investments in entities in
which Starbucks does not have the ability to exercise significant influence are accounted for under the cost
method.
All significant intercompany transactions have been eliminated.
Fiscal Year End
Starbucks Corporation's fiscal year ends on the Sunday closest to September 30. The fiscal years ended on
October 2, 2005 and September 28, 2003, included 52 weeks. The fiscal year ended October 3, 2004, included
53 weeks, with the 53rd week falling in the fiscal fourth quarter.
Reclassifications
Certain reclassifications of prior year's balances have been made to conform to the current format.
Specifically, Starbucks has reclassified its auction rate securities of $154.1 million, previously classified in
""Cash and cash equivalents,'' as ""Short-term investments Ì available-for-sale securities'' on the consolidated
balance sheet as of October 3, 2004. The Company had historically classified these securities as cash
equivalents based on management's ability to liquidate its holdings during the predetermined interest rate
reset auctions, which generally occurred within 90 days of acquiring the securities. Although management had
determined the risk of failure of an auction process to be remote, the definition of a cash equivalent in
Statement of Financial Accounting Standards (""SFAS'') No. 95, ""Statement of Cash Flows'' (""SFAS 95''),
requires reclassification to short-term investments.
The Company has made corresponding adjustments to its consolidated statement of cash flows for the fiscal
years ended 2004 and 2003 to reflect the gross purchases, sales and maturities of auction rate securities as
investing activities rather than as a component of cash and cash equivalents. There was no impact on
44